“Last month, some panic ensued when Apple’s weak guidance started fueling worries over peak iPhone sales and the future of the company’s growth. In encouraging investors to relax, I received a number of comments suggesting Apple give in to investors and massively raise the dividend at the next earnings report in late April,” Bill Maurer writes for Seeking Alpha. “While I understand those critical of the company’s dividend yield, I believe that management will continue to follow its current path that favors share repurchases over large dividend increases.”
“While Apple produces tremendous cash flow each quarter, investors know that most of these funds are located outside the U.S.,” Maurer writes. “As stated on page 29 of the company’s most recent 10-Q filing, only about $15.6 billion of Apple’s tremendous cash hoard was US based at the end of fiscal Q1. Instead of paying large tax bills to repatriate funds, Apple has decided to borrow against this hoard, a smart decision in this low interest rate environment. I recently called for Apple to issue more bonds given the recent pullback in US yields.”
“If Apple’s cash was all located inside the US, I would probably have a completely different viewpoint of this matter. But I don’t see why the company should issue debt just to pay a dividend. By repurchasing shares, Apple helps its earnings per share number and adds another bidder for shares to the market. Just imagine where Apple shares might be now if the company hadn’t reduced its outstanding share count by 700 million or so in the past two years,” Maurer writes. “With the combination of a low stock price and a yield that’s already much higher than it was a year ago, I don’t think management is going to change its course. Apple will continue to buy back billions of stock per quarter, and we’ll get a high single digits or low double digits dividend raise.”
Much more in the full article here.
MacDailyNews Take: Likely.